Modeling Financial Contagion using Copula

Pedro Valls Pereira and Ricardo Pires de Souza Santos ()

Brazilian Review of Finance, 2011, vol. 9, issue 3, 335-363

Abstract: This article aims to test the hypothesis of contagion between the indices of financial markets from the United States into Brazil, Japan and the UK for the 2000 to 2009 period. Time varying copulas were used to capture the impact of the sub-prime crisis in the dependence between markets. The implemented model was an ARMA(1,0) st-ARCH(1,2) to the marginal distributions and Normal and Joe-Clayton (SJC) copulas for the joint distribution. The results obtained allow to conclude that both for the gaussian copula and for the SJC copula there is evidence of contagion between the US market and the Brazilian market. For the other two markets, the UK and Japan, the evidence of the presence of contagion between these markets and the US has not been sufficiently clear in both copula.

Keywords: Contagion; Time Varying Copula (search for similar items in EconPapers)
JEL-codes: C10 C12 C13 G10 G15 (search for similar items in EconPapers)
Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://bibliotecadigital.fgv.br/ojs/index.php/rbfin/article/download/2942/2273 (application/pdf)
http://bibliotecadigital.fgv.br/ojs/index.php/rbfin/article/view/2942 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:brf:journl:v:9:y:2011:i:3:p:335-363

Access Statistics for this article

Brazilian Review of Finance is currently edited by Marcio Laurini

More articles in Brazilian Review of Finance from Brazilian Society of Finance
Bibliographic data for series maintained by Marcio Laurini ().